Presentation by Elizabeth Lukanen at the "Many Faces of Community Health" conference, Minneapolis, MN, October 22 2009.

1. National Health Care Reform: The Proposals & the Politics Elizabeth Lukanen, MPH State Health Access Reform Evaluation (SHARE ) State Health Access Data Assistance Center, University of Minnesota 2009 Many Faces of Community Health Conference Minneapolis, MN October 22, 2009 Funded by a grant from the Robert Wood Johnson Foundation

2. Outline of Presentation Drivers of Reform Key Players in Health Reform Proposals Status High Level Policy Overview Cost Estimates of Proposals Legislative Process – Next Steps Outlook for Reform Impact on Community Health Centers 2

3. What is Driving Health Care Reform? 3 Cost Access Quality Could be better!

4. U.S. Health Care Costs The U.S. will spend roughly $2.5 trillion on health care in 2009 $8,160 per person Since 2000, inflation-adjusted costs have been growing at 5.5% per year, considerably faster than overall economic growth 4

5. National Health Expenditures Per Capita, 1986-2010 5 Actual Projected Calendar Year Source: CMS, Office of the Actuary, National Health Statistics Group.

6. “Status Quo” Projected Federal Spending 6

7. Increase in number of uninsured15.4% of the population in 2008 Millions of Uninsured, all ages 7 Source: U.S. Census Bureau, Current Population Surveys (March), 1989-2008

8. Drop in Employer-Sponsored Coverage Source: US. Census Bureau, Income, Poverty, and Health Insurance Coverage in the United States: 2008. 8

9. Quality: Regional Variation 9 Source: Dartmouth Atlas of Health Care

10. Quality: Misuse, Overuse, Underuse 2.5-fold variation in Medicare spending across counties cannot be explained by local prices, age, race and underlying health of the population (Wennberg J, et al.) Medicare beneficiaries in higher-spending, higher-utilization regions do not receive “more effective” care (Fisher ES, et al.) 54.9 % of American adults receive only half of their recommended health care (McGlynn EA, et al.) 10

11. Key Players in Health Reform

14. Committees 14 Chair House Education and Labor Rep. George Miller, D-CA Chair House Ways and Means Rep. Charles Rangel, D-NY Chair House Energy and Commerce Representative Henry Waxman, D-CA Senator Finance Chair Sen. Max Baucus, D-MT Senate Health, Education, Labor and Pensions (HELP) Sen. Chris Dodd, D-CT

15. Other Legislative Players 15 Speaker of the House Nancy Pelosi (D-CA) Senate Majority Leader Harry Reid (D- NV) Blue Dog Democrats Senator Olympia Snowe R- ME

16. Special Interest Groups 16 President America's Health Insurance Plans Karen Ignagni President-elect, American Medical Association J. James Rohack President American Federation of Labor and Congress of Industrial Organizations Richard Trumka President National Federation of Independent Business Dan Danner President of the Service Employees International Union Andy Stern AARP CEO A. Barry Rand

17. Proposals Status: House

18. House – HR 3200 America’s Affordable Health Choices Act Jurisdiction held by 3 committees Education & Labor (Miller, D-CA) Ways & Means (Rangel, D-NY) Energy & Commerce (Waxman, D-CA) 18

19. House – HR 3200Passage In Energy & Commerce, “Blue Dogs” fought to limit government intervention and cost Final Energy & Commerce version included amendments required by “Blue Dogs” : Cost of Medicaid expansion shared with states Reduction in subsidies to population between 133-400% FPL More small employers exemptions from mandate Public plan must negotiate provider rates, and follow same insurance reforms 19

20. House – HR 3200Passage (continued) Committee Votes Passed Education & Labor by party line vote of 26-22 Passed Ways & Means by party line vote of 23-18 Passed Energy & Commerce by party line vote of 31-28 20

21. Proposal Status: Senate 21

22. Senate Jurisdiction held by 2 committees Health, Education, Labor and Pensions (HELP) Committee (Harkin, D-IA; Formerly Kennedy, D-MA) Finance Committee (Baucus, D-MT) 22

23. Senate Passed HELP Committee by a party line vote of 13-10 Passed Finance Committee with a vote of 14-9 and a historic vote in favor by Republican Olympia Snowe (R-ME) Also, Senate Budget Committee passed a Budget Resolution in April with a vote of 53-43 Reform must be budget neutral over 10 years Any bill that goes through Senate must follow this 23

24. High-level Policy Overview 24

25. Provisions At a Glance 25 Co-ops

26. Agreement Across Proposals 26

27. Agreement Across ProposalsMarket Regulation Insurance exchange Pool model for individuals, small employers and those without ESI Individual Mandate With hardship waivers Insurance Market Reforms No rating on health status, gender, or occupation; rate restrictions on age Guaranteed issue No annual/lifetime benefit cap 27

28. Agreement Across ProposalsBenefits/Quality Standards for “adequate coverage” or “minimal benefit package” Require no cost sharing on preventive services Wellness initiatives, focus on prevention Delivery System Reform, “Medical home” Money toward comparative effectiveness research Workforce development grants Targeted towards nurses, primary care and rural areas 28

29. Agreement Across ProposalsAccess Expand Medicaid to across-the-board eligibility floor, most likely up to 133% FPL Subsidies for families < 400% FPL to buy into the exchange through sliding scale “affordability credits” Employer Participation “Pay or Play” Mandate or weaker “free rider” penalty Tax credits for small employers offering employer sponsored insurance 29

30. Agreement Across ProposalsRevenue/Savings Savings Medicaid and Medicare Medicare Advantage plans New Revenue: Tax “Cadillac” plans Individual and employer penalties for violating mandate 30

31. Disagreement Across Proposals 31

32. Disagreement Across Proposals Public Option Necessary in areas where there is high market consolidation? Will it act like Medicare and set rates or will it negotiate for rates? Size of Expansions and Tax Credits The lower the subsidy, the lower the cost and perception of government intervention Assumptions about “affordability” 32

33. Disagreement Across Proposals Federal Role House wants Fed to play a strong role, Senate wants state to play a larger role Locus of exchange, insurance regulation, financing Medicaid expansions Tort Reform New Revenue Tax insurers? Tax the wealth? Sugary beverage tax? 33

34. Disagreement Across Proposals Payment Reform Increase primary care rates relative to specialty care? Cut Medicare payments attributable to avoidable hospital readmissions? Tie Medicare hospital money to quality? Medicare regional rate re-alignment? Abortion Prevent insurance purchased with federal subsidies from covering abortions? 34

36. Show Me The Money! 36

37. House – HR 3200 $1.042 Trillion over 10 years Net $239 billion deficit increase Permanent reductions in annual Medicare FFS rate updates Setting payment rates in the Medicare Advantage program based on per capita spending Changes to Medicare Part D Tax on insurance plans with relatively high premiums Cancels scheduled 21% physician payment cut 37

38. Senate Finance $829 billion over 10 years Net deficit reduction of $81 billion Permanent reductions in annual Medicare FFS rate updates Setting payment rates in the Medicare Advantage program based on average of the bids Reduction in DHS payments by $45 billion Excise tax high premium health plans Fees on manufacturers and importers of drugs and devices 38

39. Senate HELP $645 billon over 10 years $1 Trillion with Medicaid expansion Some Savings due to reduction in uninsured No authority to make changes to Medicare and Medicaid 39

40. Legislative Process – Next Steps

41. Path to the President: Overview Combine committee bills, introduce on floor House must combine 3 bills, need simple majority Senate must combine 2 bills, need 60 votes or reconciliation Leaders will need to make compromises Pass bill in each Chamber Amendments will be proposed and rhetoric will fly Combine bills in conference committee What leadership will be chosen? Vote on chamber floor for combined bill No additional amendments allowed 41

42. House – HR 3200Next Steps As amended by Energy & Commerce it has advanced to the full House, where versions will be merged via House Rules Committee Pelosi, White House and other House Leaders will give input Merged version will be scored by CBO Then House will take up various amendments Once that process has concluded, full House vote Passage requires simple majority 42

44. Do they have the votes for a more “liberal” version?

45. Will House moves toward the Senate version, under pressure from White House (making it more conservative)?

46. How will the CBO score the bill?43

47. SenateNext Steps Bills will be merged on the Senate Floor, per Senate Rules Committee Heavy input by Reid and White House, key meetings already being held Then CBO will score the merged bill Full Senate will address the merged legislation Then Senate will take up various amendments (uphill battle) Once that process has concluded, full Senate vote Need 60 votes to cloture, 51 to pass bill 44

48. SenateReconciliation Reconciliation: Bill may pass the Senate with simple majority of 51 Key problems with Reconciliation: Byrd Rule: Can only take up “budget” matters to “reconcile” legislation with Senate Budget Resolution Senate Parliamentarian decides what Laws are time-limited to 10 year budget window; then sunset Example: SCHIP – created in 1997, nearly lost in 2007 Example: “Bush tax cuts” 45

49. SenateProblems with Reconciliation Lack of bipartisanship Reconciliation version could be too far right for the House, because some Democrats are excluded to get nominal Republican support Reconciliation version could be too far left for the House, because moderate Democrats and all Republicans are excluded Limited to “budget” matters, would exclude major aspects of reform (e.g. insurance market reforms) 46

51. Conference Committee The versions that pass the House, and Senate respectively, will not be identical A Conference Committee will be formed to reconcile the two versions, and it will be scored by CBO This version will return to the respective Chambers for a final vote If those versions pass, the bill goes to the President 48

52. 49 Outlook for Reform…

53. Democrats can’t achieve 60 votes in Senate, rely on reconciliation Vastly limited reform: Coverage expansions, including subsidies Medicare payment reform Tax “high cost benefit plans” Reduce DSH (Medicaid and Medicare) Pay for comparative effectiveness studies Create tax credits for small businesses and others Workforce development grants This would exclude, mandates, insurance market reform, creation of exchange The less-controversial initiatives could be included in a companion bill 50

54. Democrats Achieve 60 Votes Most likely a “moderate” version of reform Coverage expansions with low federal price tag No public option, unless with limited trigger Establish federal benchmark for qualifying plans Individual mandate (softened) Employer mandate (softened) Insurance market reforms Some Medicare spending reductions Likely need both high income surcharge and excise tax 51

55. My Two Cents Timeline will continue to push out A high-level framework will be passed, but will be phased in over time to allow for recovery of economy Reform is not likely to bend the cost curve Issues like payment reform will be tackled in the next phase Quality will also be dealt with in next phase 52

56. 53 Impact on Community Health Centers

57. Impact on CHCs - New Money Increases in funding to CHCs Increased funding for National Health Service Corps (recruitment, loan repayment) Grants for community-based enrollment initiatives (HELP) Prevention and Wellness grants Grants for state, local, and tribal health departments to support core public health infrastructure and activities (House) New grant for community-based residency training program 54

58. Impact CHCs – Coverage Expansion Increased FMAP to states through 2019 (Senate Finance) Requires single, streamlined online application (Senate Finance) Undocumented immigrants are not eligible for federal benefit, some verification required New eligibility rules and categories might pose major confusion in short term 55

59. Impact on CHC - Exchange Exchange may facilitate and centralize enrollment, CHC knowledge will be crucial Exchange plans must consider “Essential community providers” in-network (HELP) Insurers in state exchanges required to pay FQHC PPS payment rate (Senate) Undocumented immigrants can’t purchase insurance through exchange (HELP) 56

60. Impact on CHCs – Payment Changes Maintained or expanded payment for teaching hospitals including FQHCs Increased funding for primary care services Remove cap on Health Center Medicare payments (MATCH Act) Likely reduction in DHS payments 57

61. Impact on Health Centers (HC) – Massachusetts Example Despite reduction in uninsured, caseloads rose % of low-income adults uninsured fell, but less than statewide drop % of statewide uninsured receiving care at HC rose Overall revenues rose slightly Insurance expansion helped patients get care Many newly insured were previously their uninsured patients Some newly insured had higher needs when coverage started Greater role in enrollment, new procedures & systems meant increase in administrative burden Faced challenges recruiting and retaining clinicians due to increased demand 58 Source Ku, et. Al: Full report : http://www.kff.org/healthreform/7878.cfm

62. Contact Information Elizabeth Lukanen, M.P.H elukanen@umn.edu State Health Access Data Assistance Center www.shadac.org University of Minnesota School of Public Health Division of Health Policy and Management 2221 University Avenue, Suite 345 Minneapolis, Minnesota 55414 (612) 624-4802 59